Missouri lawmakers want to eliminate the state income tax. However, local professionals are concerned that this will lead to the introduction of transfer taxes.
The American Real Estate Association (ARA) is supporting the Missouri Association of Realtors (MAR) in opposing House of Representatives Joint Resolutions 173 and 174, which would allow state lawmakers to phase out state income taxes and supplement revenues with expanded state and use taxes through two constitutional amendments.
Supporters of the resolutions say eliminating income taxes will attract more businesses to the state and allow families to keep more of their income. However, opponents – including the MAR – say the proposed changes will have a domino effect, opening the door to the introduction of transfer taxes on the sale of a house, new taxes on services and the potential for a combined sales tax rate of 16 percent.
Brian Jared
“We are thrilled to have the American Real Estate Association join us in this critical statewide effort,” Brian Jared, president of the Missouri Association of Realtors, said in an emailed statement. “I have sold real estate in Missouri my entire career, and I know what Amendment 5 would mean on Main Street.”
Jared said the most concerning parts of the resolutions and associated amendments are that they allow lawmakers to significantly increase sales taxes for five years without voter approval and expand the list of goods or services that can be taxed, such as the cost of household utilities, child care and rent.
Lawmakers would also have the opportunity to override the ban on real estate transfer taxes, which passed in 2010 by a whopping 83.73 percent vote.
“It would raise costs every time someone buys or sells a home, add new taxes to the services families use, and hit seniors on fixed incomes the hardest, all without a voice of the people,” he added in the statement.
An April report from Independent Missouri explained the potential impact of the changes on the state:
- Income taxes account for 65 percent of state revenues
- Sales taxes account for 22 percent of state revenues
- The state’s top income tax rate is 4.7 percent for taxable incomes greater than $9,200 per year
- The sales tax is 3 percent for general revenue, but earmarked state and local sales taxes push the total sales tax to between 7 and 8 percent
- Sales taxes would have to rise by as much as 8.5 percent to offset the revenue lost by eliminating income taxes, without expanding the range of goods and services that can be taxed.
ARA co-founder Mauricio Umansky said the amendments, dubbed “The Everything Tax,” are negative for agents and consumers, and that ARA will do everything it can to support MAR as it ramps up its efforts ahead of the August 4 vote.
Mauricio Umansky | The Agency
“Amendment 4 would make it much harder for citizens to fight back,” he said, referring to the ability for lawmakers to raise taxes without voter approval. “That’s a bad deal for hardworking agents and for every Missouri family trying to buy or keep a home. When Missouri’s Realtors stood up to stop it and asked for a national partner, ARA responded. We urge a no vote on both.”
Jason Haber
Jason Haber, ARA’s other co-founder, said the group provides financial and on-the-ground support through phone banking and helps organize pre-election events, including a rally on Thursday in Columbia, Missouri.
“Our goal for ARA is to be the signal for the real estate industry,” he said in a telephone conversation Inman. “Whenever officers need help anywhere in the country, they send out the signal, and we show up, and we have their back. That’s exactly what happened here in Missouri; they sent out the signal and ARA responded.”
Haber said there is a lot at stake for homeowners, home sellers and home buyers in Missouri, especially when it comes to affordability. The ARA co-founder pointed to a website for Missourians for Fair Taxation estimates that the typical Missourian will see an annual net tax increase of $535 if the changes are passed.
“If you look at this through a few lenses, primarily for homebuyers and homeowners, [this law] could make it harder to buy a house if [real estate] transfer taxes are introduced in addition to taxes on other items such as home inspections, decorating, painting, plumbing, construction and other real estate services. Those things could be taxed in a way that they are not now,” he said. ‘And if we call from there [housing] Affordability makes everything more expensive for other groups, such as seniors and people on a fixed income.”
Haber said MAR and ARA have bipartisan support, with some Republican lawmakers joining Democrats in their opposition to the bill due to its elimination of state revenue benchmarks that must be met before an income tax cut can occur, and no legal recourse for voters if the amendment results in a higher tax burden.
“So we think it’s not only bad for the real estate community in Missouri, but also for everyday citizens of the state,” he added. “We are excited to work with people from across the political spectrum in the state to help defeat these two amendments, and we are especially honored to partner with the Missouri Association of Realtors, who has done so much good work in this state.”
Email Marian McPherson
